No light at end of tunnel yet on Eskom contracts

IT IS unlikely the long-delayed independent power producer contracts for the supply of renewable energy will be signed before next year, parliament has heard.

The departments of energy and public enterprises and representatives from Eskom appeared before parliament’s energy committee to explain why the contracts, which have been awaiting signature for nearly two years, have still not been signed.

Former energy minister Tina Joemat Pettersson said they would be signed by April, but new Energy Minister Mmamoloko Kubayi delayed the process saying she wanted to speak to Minister of Public Enterprises Lynne Brown first.

Deputy director-general for policy planning in the department of energy, Ompie Aphane, however told the committee there were six steps that needed to be completed before signing could happen.

Among the steps listed is the conclusion of the update of the Integrated Resource Plan to define the “pace and scale of new generation capacity”, which Aphane said would be completed by February next year.

They also still needed to approach the National Energy Regulator of South Africa (Nersa), which sets electricity tariff prices, regarding “Eskom’s hardship”.

Aphane said the problem was the projects resulted in “a higher cost to Eskom than it could recover through tariffs paid by its customers and thus had an adverse impact on its balance sheet”.

Power produced by the IPP’s was also no longer needed as there was an oversupply of electricity and lower demand as a result of low GDP growth.

Brown said contracts with independent power producers in the first three bid windows had been signed, but it was those in bid windows four and five that had been delayed.

The presentation states that government risks litigation if the process is not resolved.

As the holder of Eskom’s guarantees, government also risks increased exposure on these if Esko financial woes worsen and the energy utility defaults.

Other risks listed include a potential sovereign downgrade and market uncertainty, affecting investor confidence.

Brown said renewable energy was expensive, costing R2.14 per kilowatt hour (kWh) to produce.

Eskom would only be able to charge about 84c/kWh to consumers.

Eskom had earlier indicated it would only sign those contracts where the cost of energy was 77c/kWh or less.

But MPs challenged the presentation saying it relied on old figures for the cost of renewable energy, and did not factor in the cost of building new nuclear plants into its calculations.

IFP MP Jan Estherhuizen said “Minister Brown should have just instructed Eskom to comply with the law and sign the contracts”, adding that the long wait in signing could cost the country R60billion in investments.

DA MP Gordon Mackay said he did not buy Eskom’s “sob story” that IPPs were impacting its balance sheet.

“That is a result of years and years of mismanagement at Eskom. And Eskom wants to procure nuclear, but it says it can’t afford renewables which are far, far cheaper than nuclear.”

The EFF’s Mzingisi Dlamini said his only concern was the cost to the consumer, and if the IPP contracts were going to affect their pockets “we will never agree to them”, he stated. — TMG